Name: Stephanie Hughes Age: 36 Job: PA to director at television company in central London Salary: over pounds 24,000

Stephanie is a self-confessed keep-fit fanatic, and her money matters appear to have a healthy glow too. "I'm not in any financial difficulties, and I have no borrowings to speak of, so I'm quite happy with my money... and I can afford to save," she says. Her outgoings are low. She cycles to work, so spends hardly anything on transport. Stephanie says she tends to end up with about pounds 200 to spare every month. Even retirement doesn't scare her because she has been paying into a company pension scheme since she was in her early twenties. And now her flat is on the market for pounds 100,000 - way above the pounds 56,000 mortgage she has on it. But lurking in the background of this rosy scene, Stephanie has some fairly hefty credit card balances.

Fiona Price is the managing director of independent financial advisers Fiona Price & Partners (0171-430 0366) who specialise in advising women. She says: "Stephanie has got about pounds 4,000 with the Halifax at the moment. This is the right sort of amount for her to keep in cash given her income, but her "Liquid Gold" account at the Halifax is only paying her 2.65 per cent in interest a year. She would get 6.4 per cent a year if she switched the money to the "Invest Direct" postal account with Nationwide.

However, Stephanie has pounds 3,700 outstanding on credit, on her Ikea and John Lewis storecards and her Visa card. She is paying interest on this amount at an annual rate of between 18 and 26.68 per cent. If you compare this rate to the rate she's getting on her savings in the Halifax, it obviously makes sense to use her savings to clear that debt.

After she's done that, she can rebuild her cash balance using the pounds 200 she has spare each month. She might want to add the proceeds of her free Woolwich shares, when they materialise. In future, when she buys things, she should save up and pay cash or use interest-free credit, wherever she can.

Fortunately for Stephanie, unless her circumstances change, she doesn't have to worry about her pension. She has been in a final salary scheme (where you get a pension income based on salary) at retirement with her employer since 1985 when she was 24, so at this rate, she should be on target to get around the maximum pension of two-thirds of her final salary.

Stephanie's life and critical illness insurance policy (which covers her mortgage) could be cut by pounds 7-pounds 8 per month by changing to a different company. But since she is planning to move and might need a bigger mortgage, it makes sense to look at this later. Right now, she's got a capital repayment mortgage, which means there is no risk attached to the loan being repaid. She is paying interest and some of the capital she borrowed for the flat back to the Woolwich each month. If she is cautious, she should go for this type of mortgage again when she moves. It is usually the cheapest sort of mortgage to have when interest rates are less than 10 per cent. If they rise above this, it is cheaper to have an interest-only mortgage (and repay the capital at the end using the proceeds of an investment such as an endowment or a Personal Equity Plan). But this is more risky and you need to review the investment regularly. Stephanie could also think about fixing the interest rate on her mortgage over three to five years, if this looks like a good idea at the time she moves.

Since she's single, I would advise Stephanie to take out an income replacement insurance policy, which would give her an income if she became ill long- term. She should also check what ill-health pension benefits her employer provides.

Remember, financial planning is not black and white. There may be an ideal solution, but this has to be tempered by what you can afford. Most people have a limited budget, so establishing your priorities is important. Priority number one should be to clear any debt, then to build up enough cash to cover your short-term spending needs and emergencies. It's a good idea to have a sum of about three months' worth of expenditure in a deposit account.

Priority number two is to save for retirement. Boring as it may seem, particularly to young people, the fact is, the longer you leave it the more expensive it gets. I won't frighten you with figures! What I call the "luxury savings" such as Tessas and PEPs (two tax-free ways of investing your savings) come in between the short and the long-term. Of course what you choose depends on things like how much risk you want to take, your taxes and how long you want to invest for. You also need to balance the money you have between investment and protection policies, such as income replacement insurance, which I mentioned.

In general, Stephanie's doing fine. She's got the basics in place, so once she's got rid of her credit card debts, it's really a question of adding to her "portfolio" of investments and insurances in the futuren

Interview by Rachel Fixsen

If you would like a "money makeover" please write including details of your name, job, salary, reasons you need advice, and a daytime telephone number to Money Makeover, Features, 1 Canada Square, Canary Wharf, London E14 5DL; fax 0171 293 2182

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